How the GOP Health Care Plan Could Take Another Big Bite Out of Medicaid

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When the House of Representatives passed the American Health Care Act and sent it over to the Senate, the assumption was that the upper chamber would soften the impact on poorer and more vulnerable Americans who would be facing major reductions in Medicaid spending.

The House bill would end the Medicaid expansion program under the Affordable Care Act that allowed millions of Americans who were uninsured to gain access to the program.

But when it comes to the entitlement program meant to provide low-income Americans and particularly children with access to basic medical care, some Senate Republicans appear just as eager to pare back spending as their colleagues in the House.

Sens. Pat Toomey of Pennsylvania and Mike Lee of Utah are reportedly working together on an amendment to the House plan for Medicaid, which would already transform the program into a state-run block grant program and slash an estimated $839 million in spending on the program over 10 years.

The Toomey-Lee proposal would take another large bite out of Medicaid funding by changing the formula under which annual adjustments to the amount of money in the block grant would be made. The House plan was to tether annual increase to the rate of medical inflation, which has historically been higher that the broader consumer price index. Toomey and Lee are proposing that instead of using the rate of medical inflation as the guide for adjusting Medicaid caps, the government should use the CPI-U index, which tracks inflation in urban areas of the country.

That would sharply reduce the annual increases to Medicaid block grants.

The senators justify the change by pointing out that between 1999 and 2015, Medicaid’s per capita costs have risen at a rate lower than the CPI-U. However, health policy experts point out that projections from the Congressional Budget Office show Medicaid’s rate of cost increases rising again in the near future. The slower growth in recent years, they argue, is a result of a combination of factors, including a shift in how prescription drug coverage was funded, whose effects on the growth rate were only temporary.

“In significant part, the past growth rate reflected the shifting of prescription drug costs for dual eligibles (people eligible for both Medicaid and Medicare) from Medicaid to Medicare when the Medicare Part D drug benefit took effect in 2006,”” writes Edwin Park of the Center on Budget and Policy Priorities.

“In addition, overall prescription drug costs grew at historically low rates during this period as a number of costly drugs went off-patent, fewer blockbuster drugs came to market, and utilization of generic drugs increased,” he added. “That trend has since reversed, with growth in drug costs accelerating in the last two years due to the new drugs treating Hepatitis C and large cost increases for specialty drugs. Moreover, in coming years, new but costly medical breakthrough drugs to address diseases such as Parkinson’s will likely come to the market, further driving up drug spending.”

The Toomey-Lee proposal is part of a larger debate going on among Republican senators. Last week, Ohio Sen. Rob Portman indicated that he is more reluctant to slash Medicaid spending.

“I couldn’t support the House bill, because I didn’t believe it provided adequate coverage for people who are currently being helped by expanded Medicaid,” he said, indicating that he wants to see a less harsh approach.

A longtime reporter on the intersection of the federal government and the private sector, Rob Garver is National Correspondent, based in Washington, D.C. He has written for ProPublica, The New York Times and other publications.